Fourth Circuit says "de novo" means "de novo" for SOX whistleblowers
I am pleased to report a favorable decision today from the U.S. Court of Appeals for the Fourth Circuit. In Stone v. Instrumentation Laboratory Co., No. 08-1970 (4th Cir. 12-31-2009), the Court reinstated David Stone's SOX case after a lower court dismissed it saying that it would be "absurd" to allow Stone to have a new trial after a Department of Labor administrative judge dismissed it. The Court found that the language in the Sarbanes-Oxley Act (SOX), 18 U.S.C. Section 1514A(b)(1)(B), "to be plain and unambiguous." The Court added, "In applying preclusion principles, the district court strayed from the plain and unambiguous meaning of § 1514A(b)(1)(B). ... A plaintiff’s right to pursue such relief is not circumscribed in any manner by the statute." "By definition, de novo review entails consideration of an issue as if it had not been decided previously." The Court also rejected a comment by the former Secretary of Labor that urged against allowing complainants to retry their cases in federal court. The National Whistleblowers Center and the Government Accountability Project joined together to file an amicus brief urging this result. Tom Devine and Kasey Dunton of GAP worked with me on that amicus brief. Congratulations to Adam Carter of The Employment Law Group for this excellent result for his client.
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Yesterday the Fourth Circuit issued an excellent decision for plaintiffs who wish to pursue de novo civil actions in federal district courts. Adam Carter and I thank Richard Renner, on behalf of the National Whistleblower Legal Defense and Education Fund, and Tom Devine, on behalf of the Government Accountability Project, for their superb amicus brief in support of David Stone's position that a Sarbanes-Oxley (SOX) complainant may seek de novo review in federal court after the complaint has been pending before DOL for over 180 days without a final decision by the Secretary of Labor.
On December 31, 2009, in a case of first impression, the Fourth Circuit held in Stone v. Instrumentation Laboratory Company that a Sarbanes-Oxley (SOX) complainant may seek de novo review in federal court after the complaint has been pending before DOL for over 180 days without a final decision by the Secretary of Labor. In Stone, the whistleblower lost a Motion for Summary Decision before the DOL’s Administrative Law Judge (ALJ) and successfully petitioned the Administrative Review Board (ARB) for review. Before his initial brief was due, Stone followed all necessary procedures and brought an action in federal district court seeking de novo review.
The employer filed a Motion to Dismiss which the district court granted, relying on comments in DOL implementing regulations stating that “the Secretary anticipates that Federal courts will apply [preclusion] principles” when a SOX claim is removed to federal court. The district court held that allowing de novo review of a “final judgment” would be absurd and an inefficient use of judicial resources. The district court remanded the case to the ARB for a faster review of the ALJ’s decision.
On appeal, the Fourth Circuit unequivocally rejected the lower court’s decision, finding that:
• The ARB’s dismissal of a SOX claim due to the complainant’s removal of the case to federal court does not result in a final decision being issued by the Secretary of Labor;
• Comments from the Secretary of Labor do not inform the literal interpretation of a federal statute, nor do they override congressional intent;
• Congress, in enacting SOX, “expressly provided for de novo non-deferential review in district court;”
• Deferring to an administrative agency, “even if more efficient, is in direct conflict with the unambiguous language of [SOX];”
• “‘Courts do not, of course, have free rein to impose rules of preclusion. . . the question is not whether administrative estoppel is wise but whether it is intended by the legislature.’”
In essence, the Fourth Circuit held that a right to a de novo review means just that. “The plain language of § 1514(b)(1)(B) unambiguously establishes a Sarbanes-Oxley whistleblower complainant’s right to de novo review in federal district court if the DOL has not issued a ‘final decision’ and the statutory 180-day period has expired.”
Our thanks again to Richard and Tom for their support.